(Bloomberg) -- Blue Owl Capital Inc. is pushing deeper into the red-hot private credit market with a deal to buy credit manager Atalaya Capital Management, which manages more than $10 billion.
Blue Owl agreed to pay an initial $450 million for Atalaya, which focuses on private credit and asset-based lending, according to a statement Tuesday, confirming a Bloomberg News report. The price includes $350 million of equity and $100 million of cash. The sellers could also receive another $350 million after the deal closes, subject to adjustments and the achievement of future revenue targets.
It marks the third acquisition in recent months for Blue Owl, which had $174 billion of assets under management as of March 31.
The firm’s recent deal spree is “about positioning Blue Owl to be a full service provider, the full spectrum provider, across the private credit marketplace,” Blue Owl Co-Chief Executive Officer Marc Lipschultz said in an interview with Bloomberg TV on Tuesday.
“It’s a very big market,” he added. “The marketplace for asset-backed credit is about $7 trillion. So just mathematically it is bigger than the syndicated loan market.”
Atalaya founder Ivan Zinn will join Blue Owl as head of alternative credit, reporting to Craig Packer, Blue Owl’s co-president.
“We view Blue Owl as an ideal strategic partner to support the next stage of our growth,” Zinn said in a statement.
Investment firms are expanding deeper into the private-credit market, which has become a serious rival to mainstream lending as banks have faced pressure to retreat. That’s pushed the market for privately negotiated loans to new heights, and raised questions about the risks it might pose to the financial system.
Atalaya, which started in 2006, is primarily owned by its founder and employees. In 2017, Atalaya sold a minority stake to Dyal Capital Partners, which is now part of Blue Owl. Atalaya’s assets have quadrupled since then.
Burgeoning Market
The purchase pushes Blue Owl further into asset-based lending by private credit firms, which sees lenders relying on contractual cash flow generated by a defined pool of financial assets. Such financing has been increasingly gaining traction in private markets where investors are looking beyond directly negotiated loans in the hunt for more lucrative returns.
“When you bring together the credit capabilities, including some asset-backed capabilities we have at Blue Owl, marry them with Atalaya, we see a tremendous amount of growth, because we can deliver a product that will deliver great risk-adjusted returns for investors,” Lipschultz said. “The fundamentals to us are appealing.”
What Is Private Credit and Why Is it Growing So Fast?: QuickTake
It also allows Blue Owl to double down on debt markets, yet diversify from direct loans tied to private-equity backed companies and buyouts. The majority of the $1.8 billion of fee-related revenues generated by Blue Owl in the 12 months through March came from credit.
The transaction extends a dealmaking spree at Blue Owl since April worth a total of $1.7 billion, including earn-outs. The completed takeover of Kuvare Asset Management in recent weeks added about $20 billion in assets under management, while deepening ties to the insurance industry that has long relied on credit managers to oversee funds.
The buyout of Prima Capital Advisors, completed last month, added an additional $10 billion in assets and forged a bigger presence in property investing after a 2021 agreement to buy Oak Street Real Estate Capital.
The Atalaya deal is expected to close in the second half of 2024. The transaction will also add roughly 115 employees, bringing Blue Owl’s headcount to almost 1,000.
(Updates with quotes from Blue Owl Co-CEO starting in fourth paragraph)
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